- March 5, 2019
- Posted by: Editorial
- Category: Capital
Shares vs Capital for new associate
If you want to bring in a new associate in your French company, you have two options: transferring shares and increasing capital. What’s the difference between these two options, and which one is the best?
Differences in how they work
Contrary to increasing social capital, transferring shares just means that the social capital of your company changes hands; there’s no effect on its volume. In other words, transferring shares might bring a new associate in your company, but that has no effect on the amount of money the company has.
That’s not all, however: by definition, transferring shares means transferring the power in the company. As such, while increasing the social capital makes the company’s associates’ power remain as it is, transferring shares means that a shareholder will be giving part of his rights to someone else.
Though, in a lot of cases, the new shareholder is an investor who trusts in the company, and will invest a lot. As a result, they often become the party who owns the most shares, and this reduces the power of the other associates as a result.
Differences in the procedure to do them
On the other hand, increasing your social capital implies that you change the by-laws of your company. As a result, the procedure here is much more difficult and time-consuming.
So which option is better? It depends on the strategy of your company. Generally though, this is what you have to keep in mind:
Transferring shares is easier to do, but doesn’t bring any more money to the company. On the contrary, increasing capital is more financially appealing, but is also more difficult and risky.